1 Reason to Buy Pfizer (PFE) Stock

Key Points

• One of the most appealing features of Pfizer's stock is its dividend.

• The payout recently yielded a hefty 7.4% -- and it's been growing over time.

• There's reason to be bullish over Pfizer's long-term potential.

• 10 stocks we like better than Pfizer ›

I can actually think of multiple reasons to buy shares of Pfizer (NYSE: PFE) stock, but if I had to focus on only one, I'd choose its dividend. The stock's dividend yield was recently a whopping 7.4%! In other words, if you buy at recent levels, you'll collect about $740 each year for every $10,000 you have invested in Pfizer. Invest, say, $30,000, and you're looking at around $2,220 in annual income.

And better still, healthy and growing dividend-paying stocks tend to increase their payouts over time. Pfizer's total annual dividend amount was recently $1.71 per share, and that's up from $1.52 in 2020 and $1.12 in 2015.

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Keep in mind, though, that many steep dividend yields are due to the underlying stock having fallen, and Pfizer is a clear example of that phenomenon. Its shares were recently down about 18% over the past year and, in fact, are down even more over the past three years. That's largely due to several patent protections for blockbuster drugs expiring in the coming years, such as patents for Eliquis, Prevnar, and Ibrance.

But Pfizer has prepared for that eventuality by building a solid pipeline of drugs in development, some of which could become blockbusters. Partly due to its acquisition of Seagen, Pfizer has become more of a player in oncology, with much of its late-stage drugs in development focused on cancers.

Image source: Getty Images.

Another issue for Pfizer is that sales of its COVID-19 vaccine and its Paxlovid treatment for COVID-19 are down significantly from earlier levels. Still, though, they're on the market and generating revenue for Pfizer.

Another green flag for Pfizer is its valuation. Its recent forward-looking price-to-earnings (P/E) ratio of 8 is well below its five-year average of 10, and its price-to-sales ratio, recently 2.1, is well below the five-year average of 3.0. So, give this stock some consideration for your long-term portfolio -- especially if you're interested in dividend income.

Should you invest $1,000 in Pfizer right now?

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Selena Maranjian has positions in Pfizer. The Motley Fool has positions in and recommends Pfizer. The Motley Fool has a disclosure policy.